Your Guide to Guaranteed Asset Protection Insurance (GAP) in NZ

If you took out a loan to purchase your vehicle and it’s damaged beyond repair in an accident, your car insurance may not cover the amount of the loan that’s still owed to you. This can be very frustrating since you have to pay off whatever your insurer failed to cover, which may make it difficult to obtain financing for a care replacement.

This is where guaranteed asset protection (GAP) can come in handy.

Learn more about how GAP insurance works in NZ in this guide.

What is Guaranteed Asset Protection?

Guaranteed Asset Protection or GAP insurance is a separate policy that covers the gap or difference between your car's current market value and the total amount you paid. It’s intended to protect you from financial loss if your vehicle is declared a total loss or if the cost of restoring your vehicle exceeds its value.

How does GAP insurance work?

Typically, your auto insurance will only pay out the current value of your vehicle, which may be less than the price you purchased for it. When you apply for GAP insurance, you may be able to obtain additional financing to assist with car replacement costs.

One example would be if your car is insured for $10,000 but you owe your vehicle lender $12,000, GAP insurance would pay the $2,000 difference.

Who offers GAP in New Zealand?

Currently, only a small number of auto insurance providers include this type of service. But most of them offer similar benefits, such as compensation for expenses related to vehicle rental, delivery, registration, and so on.

If you’re interested in purchasing GAP insurance for your vehicle, you can check out the companies listed below to determine which services best meet your needs.

Autosure NZ

Autosure in New Zealand provides asset protection for your vehicle with a maximum loan of $100,000 over 60 months or 5 years.

Other benefits:

• Reimbursement for out-of-pocket expenses of up to a maximum of $300. 
• Reimbursement for hiring a substitute vehicle, for a maximum of five days and up to a maximum of $150 per day. 
• Reimbursement for the amount advanced under your loan for the purpose of negative equity arrangements of up to a maximum of $1,000.
• Reimbursement for your replacement vehicle’s on-road costs, delivery charges, registration costs and purchase deposit, up to a maximum of $2,000. 
• Reimbursement for your replacement vehicle’s first year’s comprehensive motor vehicle insurance premium. 
• Reimbursement for the total loss claim excess under your comprehensive motor vehicle insurance. 
• Reimbursement for unpaid comprehensive motor vehicle insurance premium that your vehicle insurer deducts from the total loss settlement of up to a maximum of $1,000. 

You can also check terms and conditions, plus their claims procedure through their online policy booklet here.

Avanti Finance NZ 

Avanti contains the same policy contents with Autosure NZ as both insurers are underwritten by DPL Insurance Limited. 

For the complete details about Avanti’s GAP insurance policy, you can check it out here. 

NZ Vehicle Finance (NZVF)

NZ Vehicle provides GAP insurance, also known as "Loan Enquiry Insurance," to car owners who want to finance the repair or replacement of their vehicle. The contract with NZVF is for 60 months, or the length of the initial credit contact. This can only be taken out when the car is sold.

Other benefits include:

• A Comprehensive Motor Vehicle insurance premium in relation to the replacement vehicle.
• Any excess in relation to the total loss vehicle.
• On Road Costs comprising dealer delivery and registration related to the purchase of the replacement vehicle.
• Deposit for a replacement vehicle up to $1000.
• Reimbursement for out of pocket expenses up to $200.
• Any amount relating to a prior debt included in the credit contract.
• Reimbursement for the cost of hiring a rental vehicle for a maximum of 5 days.

Provident Insurance NZ

Depending on whether you choose the additional "Special Benefits" coverage for your policy, Provident may additionally provide benefits that are intended to assist you in reimbursing you for associated incidental expenses.

Other (special) benefits

• The deposit for the replacement vehicle of up to a limit of $1,000. 
• On-road costs when getting a replacement vehicle, including delivery charges and registration costs. 
• The Excess applicable to your Total Loss claim under your Comprehensive Motor Vehicle Insurance. 
• Your premium on the first year of a comprehensive motor vehicle insurance policy covering your replacement vehicle. 
• Reasonable personal expenses as a result of the Total Loss of your Vehicle of up to a limit of $300. 
• Reasonable cost of hiring a rental vehicle as a result of the Total Loss of your Vehicle of up to a limit of $350.

Do you need GAP insurance?

Before deciding on buying guaranteed asset protection, check with your car insurer or policy to see how much you’re covered in case of an accident. 

Generally, GAP isn’t a legal requirement in New Zealand. When you take out a car policy, you’re automatically covered for costs and events that are expressly stipulated in your agreement. However helpful, not all car policies cover for the entire costs that you incur, especially overhead expenses like delivery charge, on-road costs, hiring a vehicle, and registration fees.

What qualifies for GAP insurance? 

On certain occasions, it’s advised that you purchase guaranteed asset protection if:

• You made a down payment of less than 20%
• Your vehicle is financed for at least 60 months
• You rented the car (carrying GAP is generally required for a lease)
• Your car that depreciates faster than the average
• You transferred negative equity from an existing auto loan to the new loan

What is negative equity?

Negative equity, often known as being "upside-down" on your car loan, refers to the situation in which you owe more on your auto loan than the value of your vehicle.

What does 'totalled' mean in car insurance?

Your car is considered “totalled” or total loss when it’s unrepairable or costs more to repair than it’s worth after a car accident. 

What GAP insurance doesn’t cover

There are times when GAP will not pay out if the claim for the totalled or stolen car is denied for whatever reason, or if your automobile insurance policy has lapsed. 

Other exclusions are: 

• The value of your car as shown in your loan is greater than the market value at the time of entering your loan contract.
• Your car isn’t continuously covered by a comprehensive motor vehicle insurance policy during your period of insurance; or 
• Your car insurer fails to pay the full market value of your vehicle when it’s declared a total loss.

How much will my GAP Insurance cover?

Depending on your chosen insurer, you can get as much as $3000 to $4000 GAP coverage, which can be claimed online. 

But before making a claim you should inform the police if the claim arises from an unlawful act. You can reach out to your insurer through customer service and complete all the required forms. You should likewise provide your GAP insurer with documents and supporting information so they can assist your request right away. 

Does Guaranteed Asset Protection cover the mechanical breakdown of my car? 

GAP insurance doesn’t cover mechanical breakdowns such as a seized engine or a broken transmission. 

If this is the case, you can apply for a separate mechanical breakdown insurance policy covering car damage that arises from faulty components, engine breaks, system damage and more. This also covers repairs even after the manufacturer's warranty period has expired. 

Read more about MBI here: The Ultimate Guide To Mechanical Breakdown Insurance in New Zealand (MBI)